Result analysis: NDTV Ltd

The stand-alone Q2FY09 results of New Delhi Television (NDTV), reflecting the performance of its news business (NDTV India, NDTV 24X7, NDTV Profit and MetroNation channels), are disappointing.

The revenue growth has stagnated, showing a growth of only 9.1% year-on-year (y-o-y) for the quarter. Excluding the income for shared services from the subsidiaries, the revenues are flat y-o-y, hinting towards substantial pressure on the advertisement rates in the wake of the intensifying competition, especially for NDTV India.

On the other hand, costs continue to rise as the total operating expenditure is up 29% y-o-y driven primarily by an increase in the marketing and distribution expenses (up by 105.1% to Rs21.1 crore).

The marketing and distribution expenses have shot up due to carriage fee continues to mount and the staff cost has risen by 30% y-o-y. Thus, the news business operations have turned negative on earnings before interest, depreciation, tax and amortisation (EBIDTA) basis with an operating loss of Rs10.2 crore.

Consequently, the net loss for the quarter stands at Rs13.04 crore against a loss of Rs4 crore in Q2FY08.

The road ahead

On the news side, the revenue growth is expected to slow down substantially due to the loss of market share for NDTV India in the cluttered Hindi general news genre and the increase in competition for NDTV Profit with the launch of UTVi and the proposed launch of a business channel from the Economic Times.

NDTV Imagine seems to have lost out after a decent launch with its GRPs stagnating in the range of 75-85 and a market share of ~6.5%. Except for Ramayan, none of its shows is garnering serious viewership.

We believe NDTV Imagine has underperformed our and street expectations, especially with Sameer Nair at the helm of things. We believe that unless the channel comes up with a couple of catchy shows that could drive its viewership, revenue growth and profitability for NDTV shall remain under pressure.

The company’s business model appears attractive as it pans lucrative media verticals. However, NDTV Imagine, the big new launch from the company’s stable, has failed to live up to our expectations so far and would substantially aggravate the bleeding of the company’s financials, given its current performance.

With the financial risks far outweighing the attractiveness of the wholesome business model, we expect the NDTV stock to underperform the market unless NDTV Imagine puts up a great show. Besides, the core news business is also showing signs of stagnation, which adds to our concerns.